Wednesday’s little bond yield scare was very quickly forgotten yesterday as a combination of earnings results and strong trade numbers had the local market regaining all of Wednesday’s losses with interest.

The big event of the day was National Bank’s ((NAB)) earnings report – the last of the three big banks reporting full-years. After ANZ Bank ((ANZ)) had cut its franking and Westpac had cut its dividend as well as raising capital, there was much to be anxious about, notwithstanding NAB had already been de-rated in pre-emptive sympathy.

It was hardly a good earnings result, and NAB did cut its dividend, but it did not cut franking and chose a DRP over an actual capital raise. Woohoo!

NAB rose 2.2% and dragged along the whole beaten-down sector, which gained 1.1% for the day.

Over in IT, accounting software company Xero ((XRO)) provided a similar boost to the sector after reporting earnings and jumping 9.6% to top the leaders’ board for the day. This sparked all software companies into life, and the sector jumped 3.3%. News that BNPL company Zip Co ((Z1P)), competitor to Afterpay Touch, has signed a deal to be a payment option on Amazon Australia, had that stock up 17%, but Zip is not in the index.

James Hardie ((JHX)) posted a strong half-year, sending that stock up 7.8% to support a 0.7% gain for materials.

But perhaps the most interesting element of the day was the fact bond-proxies also ran up hard once more after being dumped on Wednesday when the Australian ten-year yield shot up. The ten-year remained stable yesterday, but utilities gained 1.2%, telcos 1.0%, industrials 0.8%, and staples 2.2% with some help from a 5.0% jump for Metcash ((MTS)).

It was as if Wednesday had just been a bad dream. Volumes were as solid yesterday as they had been on Wednesday. Even high-flying healthcare, which had surely been due some profit-taking anyway, was back at it yesterday with a 1.0% gain.

There were a couple of casualties. Perenti Global ((PRN)), the mining contractor formerly known as Ausdrill, fell -10.7% on news its workers had been attacked in Africa.

Adding to the positive mood yesterday were the trade numbers for September.

The trade surplus rose to $7.18bn in the month, comfortably beating expectations. Resource exports rose 4.5% for the month to be 22% higher year on year, although this time it’s not all about iron ore, coal or gas. Take out non-monetary gold exports – gold not purchased by central banks – and resource exports are only up 1% year on year.

Total exports were up 3.5% for 15% and imports up 2.5% for 3.2%, which explains the run of trade surpluses. It is encouraging, ANZ Bank economists suggest, that capital goods imports are up 8.2% year on year when consumable imports are only up 0.8%, implying business investment over consumer indulgence.

Notwithstanding the economy could do with a bit of consumer indulgence right now.

If yesterday hadn’t happened, we might have seen more response from the trade news overnight and Wall Street’s rally, but our futures are up only 10 points this morning.

Can’t get too carried away.

Tariffic!

The news last night, confirmed by both camps, was that the US and China had agreed to a phased roll-back of tit-for-tat tariffs as a deal is worked through on both sides. The suggestion is the US will roll back the September tranche and abandon the planned December tranche in phase one.

Originally phase one had China buying more soybeans in exchange for the September tariffs not rising to 30% from 25%, with no mention of the December tranche, and later the US appeared prepared to make further concessions as long as China moved towards reforming its intellectual property laws.

So…does last night’s news suggest China has finally begun to concede on IP, or is it just that the White House has become increasingly desperate amidst impeachment proceedings and with a re-election campaign soon to kick off?

Perhaps there was a clue later in the day when a report suggested there was “fierce internal opposition” to the agreement within the White House. There was no confirmation, but fingers were immediately pointed at uber-hawk Peter Navarro, who has to date been resolute in demanding IP concessions ahead of any trade deal being signed.

More may soon be revealed, but it is known that the White House is pushing hard to reach agreement on the where & when of a phase one signing, specifically before the December 15 deadline for the new tranche of tariffs.

The Dow was up 280 points at its peak, driven by all the big industrials that have been the main victims of the trade war to date. That includes Apple.

The banks were also on a flyer, as the US ten-year yield soared another 11 basis points to 1.93%.

The late news had Wall Street back on doubt mode, with the Dow settling at a 170 point gain. Indeed, doubt was evident right from the start, given greater confidence in a tariff roll-back commencing should have had the Dow up several hundred points.

Wall Street is several times bitten, thus understandably shy. But for now it appears things are at least moving in the right direction.

Commodities

Spot Metals,Minerals & Energy Futures

Gold (oz)

1468.90

– 22.30

– 1.50%

Silver (oz)

17.09

– 0.50

– 2.84%

Copper (lb)

2.68

+ 0.02

0.82%

Aluminium (lb)

0.83

+ 0.00

0.45%

Lead (lb)

0.96

– 0.01

– 1.24%

Nickel (lb)

7.37

– 0.02

– 0.21%

Zinc (lb)

1.16

+ 0.01

0.54%

West Texas Crude

56.90

+ 0.39

0.69%

Brent Crude

62.05

+ 0.15

0.24%

Iron Ore (t) futures

82.50

– 0.90

– 1.08%

The LME was closed before cold water was thrown on the trade news late on Wall Street, but metal movements were not that inspiring anyway.

The oils, too, were positive but restrained.

The victim of the big jump in US yields was of course gold, down over twenty dollars.

The US dollar rose 0.2% to send the Aussie down -0.2% to US$0.6871.

Today

The SPI Overnight closed up 10 points.

China will issue its trade numbers for today – for October because the Chinese are that much quicker.

The RBA will issue its quarterly Statement on Monetary Policy.

Housing finance data are also due.

Quarterly results are scheduled from REA Group ((REA)) and News Corp ((NWS)).

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